Heterogeneous Firm Responses to Rising Teenage Wages

Substantial youth minimum wage changes in New Zealand between 2000 and 2007 raised teenage average wages by 5-10 per cent relative to those for adults.

We use Statistics New Zealand's Linked Employer-Employee Database (LEED) to examine whether firms' teenage labour demand responses to these changes are greater for firms with higher teenage-employment share.

We find evidence that high teen-employers reduced their teen employment relative to other firms and had lower survival rates over the period. However, firms that entered the main teen-employment industries had higher teen-employment shares than continuing firms.

The results are consistent with endogenous technology adoption in response to non-marginal changes in relative wages.